Creditors Liquidation

Thinking of a Creditors Liquidation? What Are The Options?

Creditors Liquidation is a term that is commonly used to explain the insolvency procedure that results in a company being wound up at a meeting of its creditors. It differs from one where the Directors of the business petition the court to wind up the business.

In a creditors’ liquidation the directors will involve an insolvency practitioner to help them ascertain if the company is insolvent. It is crucial that at the first sign of distress for a business a review takes place as to whether the company can trade out of any difficulties. If not, then plans can be set in place to close it down. Two weeks notice of a meeting to close the business need to be given to creditors, accompanied by a statement of affairs which sets out the assets and liabilities of the business. It will conclude that the business cannot be saved and that legally the directors are taking the correct steps in closing it down.

The creditors always vote for this to happen. Occasionally they may also request that an alternative liquidator be appointed, if they consider that the directors may have acted in a prejudicial manner, and that they do not trust the proposed liquidator to investigate thoroughly, although in a creditors’ liquidation this is quite rare.

The liquidator will investigate the conduct of the directors, but if they have acted expeditiously, then they have nothing to fear.

The important thing is to act early; the options which are available now may not be available later on.

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